February 25, 2010
Will Florida's "mini-Madoff" get a mini version of Madoff's 150-year prison sentence?With fortuitious timing because I am in Florida this morning to talk about white-collar sentencing, this Reuters story provides another case-study in white-collar sentencing issues. The piece is headlined "Florida's 'mini-Madoff' Nadel admits huge fraud," and here are the basics:
Arthur Nadel, a former Florida fund manager dubbed a "mini-Madoff" for running a decade-long investment fraud of nearly $400 million, pleaded guilty on Wednesday to criminal charges.
Nadel, 77, disappeared for two weeks before his arrest in January 2009. He had left a letter for his wife imploring her to use a trust fund for her benefit and "sell the Subaru if you need money," a reference to their motor vehicle.
The FBI arrested Sarasota, Florida-based Nadel in his home state, but the case was moved to New York because he traded through a brokerage in the city, Shoreline Trading, an affiliate of Goldman Sachs Group Inc.
Nadel, who looked frail in court and remained seated throughout the proceeding, pleaded guilty to an indictment of 15 charges, including securities fraud, mail fraud and wire fraud before Manhattan federal court Judge John Koeltl. "I understand the anger and rage of all of the people I let down so badly," Nadel told the court. "I want them all to know I will carry this burden for the rest of my life."...
Nadel admitted to creating false and fraudulent account statements for his Scoop Management LLC funds. Nadel lost money and stole investor money to pay for several businesses, including real estate in North Carolina, his wife's flower shop and private planes, prosecutors said. Nadel's guilty plea calls for him to forfeit $162 million....
Nadel has been unable to make bail and will remain in jail until sentencing on June 11 . Under the sentencing guidelines for his crimes, he can expect to spend the rest of his life in prison.
Parallels were drawn between Nadel and Madoff because they both ran Ponzi schemes in which early investors were paid with money from new clients, many of them Florida residents. Madoff is serving a 150-year prison sentence for orchestrating Wall Street's biggest investment fraud of as much as $65 billion.
In light of his age, even a 15-year sentence would likely be tantamount to a life sentence for Nadel. And yet I doubt prosecutors would be content with that number because, as in the Madoff case, the ultimate sentence in this case is more critical as a conceptual benchmark for other cases than for determining the personal fate of this elderly defendant.
February 25, 2010 at 06:56 AM | Permalink
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Hit him with 80 at minimum. White collar crime along the lines of Madoff and Nadel is far more destructive to society than armed robbery or arson where no person is physically injured, but only until recently did courts start treating it as such. It's not a question of deterrence, it's a question of retributivism.
Posted by: Res ipsa | Feb 25, 2010 9:15:33 AM
Since Nadel is 77, anything above about 10 years is just symbolic. To call it retributivism, when he will never see 70+ years of the 80 you are calling for, is just nonsense.
Posted by: Marc Shepherd | Feb 25, 2010 9:53:57 AM
I honestly think the public policy issues here are more important than the sentencing issues. He started this crime spree when he was 67. The age at which most people are retired. When you are that age there is little incentive to fly the straight and narrow because even if they catch you, you are in effect guarenteeing yourself a short and light sentence. I don't see how dying in prision frightens anyone at age 67.
Doug talks about a conceptual benchmark but how useful is that really. If this had been a 25 year old man would the best public policy argement be to lock him up for 150 years? Probably not. But more importantly, how many 25 year olds even have access to the financial and cultural resources to pull off a 400 million fraud. Zero. So beyond any symbolic value it might have the conceptual worth of such sentences is zilch.
Posted by: Daniel | Feb 25, 2010 11:04:00 AM
That did not come across as I would have liked. The point that I am driving at is as follows.
When a person is young their ability to commit acts of physical violence is at its peak but their ability to commit financial crimes is small. As a person ages their ability to commit violent crimes goes down but there is as corresponding increase in a person's ability to commit white collar crime. At the same time, because of the aging process, sentences as a practical matter are shorter. The result is the ugly reality that as a person's ability to commit white collar crime increases society's ability to punish that crime in any meaningful sense decreases.
It strikes me then, to twist an old saying, that an ounce of prevention is the only real cure. Rather than imposing 150 year senetnces we need to address the structual factors that allowed these situations to develop. Just like some states require elderly drivers to pass more frequent driver liscense examinations, perhaps we need to impose stricter financial examinations on them as well.
Posted by: Daniel | Feb 25, 2010 11:24:53 AM
In that case, Marc, should we never sentence anyone beyond their life expectancy? Does that also mean that we should only sentence people to proportional terms for the same offense--that is, if a 20-year old gets 10 years (about 1/5 of his remaining life), we should sentence a 60-year old to 2 years? Seems to me that's what you're arguing for: to calibrate the sentence to the life expectancy of the offender, and not the characteristics of the offense and the offender's past history.
I gather you would be equally comfortable with your advocacy if Nadal committed first-degree murder (with torture thrown in, just for fun), since, after all, ten years is a functional life sentence, right? Or is your life expectancy position really rooted in your oft-expressed view that white collar crime really isn't that bad?
Posted by: Res ipsa | Feb 25, 2010 11:59:21 AM
@Res ipsa: You suggested 80 years at a minimum chiefly for retributive reasons. Even a 10-year-old would probably not outlive an 80-year sentence, so if retribution is the goal, then 80 is too much, regardless of the defendant’s age. And it is worth noting that retribution is only one goal of sentencing.
I pointed out the defendant’s age merely to highlight the absurdity of your proposal; 80 years would be the wrong number regardless.
And of course, a prison sentence is only part of his punishment. He is also forfeiting substantial assets. As Doug has repeatedly, and correctly pointed out, the effect of the Madoff sentence is to make most others look “light,” when the reality is that they’re not.
When have I said that “white collar crime isn’t really that bad”? Please refresh my memory. I do not recall ever saying that. But I do think these sentences are far too long. Even an airline hijacker would probably not face 80 years, and nobody has suggested that we are under-punishing hijackers.
Posted by: Marc Shepherd | Feb 25, 2010 2:31:04 PM
It strikes me then, to twist an old saying, that an ounce of prevention is the only real cure. Rather than imposing 150 year senetnces we need to address the structual factors that allowed these situations to develop.
Posted by: Bennie | Feb 26, 2010 2:25:07 AM
Daniel writes: "It strikes me … that an ounce of prevention is the only real cure. Rather than imposing 150-year sentences we need to address the structural factors that allowed these situations to develop."
Res ispa writes: "(Daniel,)... is your life expectancy position really rooted in your oft-expressed view that white collar crime really isn't that bad?"
Can’t speak for Daniel, Res, but I suspect a lot of what gets portrayed as evil white-collar crime isn't nearly as sinister or premeditated as the authorities would have us believe.
It seems likely, for example, that at least some Ponzi schemes, big and small, were promising ventures that went sour more as a consequence of delusion, denial and financial-survival instincts (i.e. the human condition) than villainous intent.
As I read media stories about “fraudsters” I often wonder if we’ve been missing opportunities to recognize and reward deserving candidates for sainthood: those business leaders who instantly acknowledged financial troubles, quickly notified investors, clients and employees and then turned themselves in to authorities so it could be determined if they committed crimes before coming to their senses.
Heretical views, I realize, particularly now that white-collar suspects seem to have entered witch-hunt territory where child pornographers, sex offenders and citizens accused of "materially supporting" terrorism already reside.
The more we torment any of these folks, the louder the mob cheers.
Posted by: John K | Feb 26, 2010 12:39:00 PM
Again, Marc, you're not answering the crux of my point: that you are basing sentences primarily upon the life expectancy of the criminal. You said above 80 years is "nonsense" because Nadel is 77 and because he is forfeiting the very assets that he stole (I'm not sure why this should mitigate his sentence, frankly, but I'll leave it for now).
I'm not thinking about Nadel, though--I'm thinking about the absolute value of his criminal activity. If this were a case of first degree murder, I hope you would have no problem saying that more than a 10-year sentence should be imposed despite that it may be largely symbolic as a practical matter. That's because the absolute value of murder is extremely high, irrespective of the age of the offender.
Similarly, I say that crimes like Nadel perpetrated deserve a long sentence--at least long enough so that the perpetrator is guaranteed to die in prison, regardless of age. Put it at 80 years, or 70, or even 60--at a certain point it doesn't matter. I chose 80 because it pretty much guarantees that any fraudster will serve an effective life sentence. Willfully defrauding others in a manner that one knows will cost lives--my understanding is that both Bernie and Nadel knowingly stole money from charties that provide basic resources to those who do not have them--and is no different than murder.
In that sense, the proper analogy is not to the hijacker that ultimately harms no one (which, you are correct, would likely result in a 20-year sentence, maybe less), but rather the hijacker that tries to crash-land a plane and ends up killing a few passengers. I have no doubt that he would spend life in prison or, alternatively, get the needle.
Posted by: Res ipsa | Feb 26, 2010 4:16:27 PM
In some cases, you may very well be correct. But Madoff and Nadel are not that case. They didn't start getting in over their heads on something legitimate and decided to borrow from Peter to pay Paul to stay afloat--they started with fraudulent aims.
I do agree with you that child pornography guidelines, drug guidelines, and the sex offender list are hopelessly broken precisely because they carve out a one-size-fits-all rule. And in cases where fraud truly resulted from an investment getting away from someone, I'd be willing to show a little mercy. But not in this case. Nadel, whether he's 77 or 25, deserves to rot in a cell--after he's paid back the money he stole.
Posted by: Res ipsa | Feb 26, 2010 4:21:36 PM
John K --
"...white-collar suspects seem to have entered witch-hunt territory where child pornographers, sex offenders and citizens accused of 'materially supporting' terrorism already reside."
OK, so now we have zillion dollar swindlers, people who photograph nine year-olds being forced to have sex with animals, knife-point rapists, and terrorists comprising a group who are NEVER, so far as your discussion of any specific case has ever shown, properly charged and sternly punished. Noooooooooooo...they are, instead, victims of "witch hunts."
Indeed, the only specific prosecution I recall your supporting was the prosecution of the Blackwater defendants -- in other words, the one prosecution that actually WAS a witch hunt. And the prosecution that, in spite of your ideologically-based eagerness to lynch those defendants, got booted on grounds of prosecutorial trickery, specifically, inducing the defendants to speak on the then reneged-upon promise of immunity.
But wait! There's more! There is, for example, the pusher behind your 15 year-old's overdosing on meth, but who's been clever enough, or ruthless enough, to avoid being caught up until now. Now wouldn't you say the proper characterization of a person like that is a "non-violent, first-time offender?" And as such, we wouldn't want to add to "incarceration nation" by putting such a fellow in prison, now would we? I mean, really............a few teenage overdoses here, a few there -- hey, ya know, let's drop this insane drug war along with the "witch hunts" against perverts and terrorists and GIVE PEACE A CHANCE!!!
Posted by: Bill Otis | Feb 28, 2010 4:14:17 AM